More than half of HMRC fines for late VAT payment overturned

HMRC proven wrong following internal review in over 1 in 2 of the fines issued for late VAT payments and filings

Over half (53%) of HMRC’s fines against businesses for late VAT return filings or payments were overturned on internal review last year*, says Moore Stephens, the Top Ten accountancy firm.

Moore Stephens says the high percentage of these fines that HMRC subsequently withdraws suggests that it is has been too quick to issue the fines, and imposes too many fines where none are due.

HMRC has been cracking down on taxpayers who have missed the deadline to pay their VAT as part of its ongoing “dash for cash”.

Data provided to Moore Stephens shows that 15,664 internal review cases against VAT fines issued by HMRC were completed last year, with 8,288 penalties overturned.

Late-paying taxpayers are treated as “guilty until proven innocent” by HMRC, despite the fact that there is often a good reason for their late payments. 

Moore Stephens says that this data suggests that it is better for owner managed businesses and individuals to appeal for a review of the fines rather than just accepting penalties imposed by HMRC.

Mustafa Sikandary, Associate Director at Moore Stephens, says: “Late taxpayers now stand a better than 50/50 chance of winning their case against the taxman, if they seek internal review. 

“Indeed, the statistics obtained from HMRC indicates that the proportion of cases being overturned is actually slightly increasing.”

“HMRC is currently overturning over half of its own fines for late payment of VAT – they could be accused of being somewhat over-zealous in handing out these penalties.

“There is now a good probability that fines for late payment will be cancelled if taxpayers fight back. Businesses accused of late payment and filing of VAT returns should use the internal review system to ensure they are not being fined falsely.

“Given the recent trends, it is certainly worth asking HMRC for an internal review, particularly where the fines imposed are punitive. 

“Requesting an internal review by HMRC is currently free, and can save considerable time and expense from businesses and individuals given fines for late payment.

“There are some ‘borderline’ cases where there will be a reasonable, valid excuse – in these cases, the taxpayer could, and should, be given the benefit of the doubt.”